DueDive assessments only partially align with the "The SaaS M&A Report 2025"
"The SaaS M&A Report 2025" indicates a strong market for SaaS M&A, with increased activity in 2024 compared to 2023 and a valuation premium for SaaS companies over traditional software companies. While the DueDive’s technical due diligence does not provide financial data, we highlight factors such as technical value and debts, scalbility, and process maturity, all of which can influence a company's market position and valuation.
Technical Value: DueDive assesses the technical value of companies, which directly relates to valuation in the SaaS market. Some companies with mature SaaS solutions show a higher technical value in the assessments. The SaaS M&A report notes that SaaS companies are valued higher than legacy software companies. However, some other SaaS companies DueDive assessed have a lower technical value, often because their systems are smaller and less complex because they are in an early stage of development.
Technical Debts: As a counterpart of Technical Value on a technical balance sheet, DueDive assesses technical debts, i.e., technical barriers for future system and business development. SaaS solutions do not seem to perform significantly better in this KPI. Some SaaS companies are noted for having low technical debt, meaning that their systems are easy to maintain and develop. These systems have code that is well-structured, readable, and has good test coverage. Other SaaS companies, however, have higher technical debt, often because of missing test code, outdated dependencies, or complex and tangled code.
The DueDive reports assess scalability and process maturity, which are important for achieving the "Rule of 40" and high NRR. The SaaS M&A report notes that companies achieving these benchmarks usually have higher revenue multiples.
Scalability: Many of the assessed SaaS companies demonstrate good scalability, indicating their systems can handle a growing number of users and features without a significant drop in performance. This is supported by the fact that they employ modern technologies. However, the assessments also note that some SaaS companies' systems are monolithic, which could impact development and performance scalability, i.e., it is difficult to extend the systems with new functionality and to react on increasing load.
Process Maturity: The DueDive assessments note that many SaaS companies have good process maturity, with well-defined development and testing processes. For the early-stage SaaS companies, processes are described as being appropriate for their current size, but in need of improvement as they grow.
General tech due diligence performance: The SaaS companies assessed vary in their performance across all technical Due Dive KPIs. Some companies are well-established with strong technical value, low technical debt, and high team productivity, while others have room to improve in these areas.
Conclusion: The DueDive assessments from 2024 only partially align with the SaaS M&A report. This emphasizes the need of technical due diligence assessments complementing the financial due diligence. Just checking that the technical solution is a Software-as-a-Service (SaaS) is not enough!